The Foster City City Council will consider a hotel-tax increase and the fate of the Fourth of July fireworks celebration, among myriad other issues, in a wide-ranging budget review Monday at City Hall.

The goal of the study session is to take stock of the current fiscal year, which has reached its halfway point, and firm up plans for the next one beginning in July.

The budget deficit for the 2010-11 fiscal year has grown by $1.4 million to nearly $5 million, due in part to lower-than-expected property and vehicle-license tax proceeds, according to Finance Director Steve Toler. The city will use its general fund reserves to plug the gap.

The city has committed to eliminating by 2014 a structural deficit that has grown to roughly $3.5 million a year. That effort begins in earnest next year, when the city is tentatively planning to shave $2 million from its budget through personnel reductions and other measures.

Foster City’s path to fiscal sustainability may include increasing its hotel tax from 8 to 10 percent. The city currently has the lowest such rate in San Mateo County, according to a staff analysis, which shows eight cities have rates of 12 percent, and six cities have rates of 10 percent.

Increasing the tax by 2 percent would bring in an additional $300,000 or so in revenue every year, Toler said. Two establishments would be affected: the Crowne Plaza Hotel and Courtyard by Marriott.

The council will be asked Monday to give staffers the green light to continue preparing for the tax hike, which would have to be approved by voters in November. The council would need to make a final decision on the matter in June or July, Toler said.

It’s unclear at this point, however, whether a majority of the council would support placing the measure on the ballot.

“It has to be proven to me that there is an absolute need to increase it before I would support it,” said Councilman Rick Wykoff.

The council will also consider a plan to save the city’s Independence Day fireworks display, the last of its kind in the county.

The Foster City Lions Club has volunteered to handle parking at the event and turn over the proceeds to the city, which is looking for sponsors to foot the rest of the bill.

The study session is scheduled to begin at 5:30 p.m. at 620 Foster City Blvd.

balancing the budget

Expense: Foster City will review how to pay for the annual Independence Day celebration.

Revenue: The city is considering a 15-acre development critical to its long-term finances.

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